Reading Between the Lines of the Beige Book

The stock market may be providing a bit of relief today but don't let that fool you. The Federal Reserve is here to make sure that any whiff of optimism in the air is swiftly extinguished.

The central bank released its latest Beige Book, which includes information from the twelve regions as of February 23, and it ain't pretty. Beige is like ennui. Today's report is more like despair. It's the Beige Book in a new shade of gray.

We'll spare you the ugly details about the overall weakening economy, rising unemployment, and general malaise in the retail sector. Instead, we'll offer up the most optimistic passages, which can give you a good idea just how gloomy the rest of the report is.

As reported by Richmond, Chicago, and San Francisco, discount chains fared much better than traditional department stores and specialized retailers, recording sales gains in many cases as consumers continued to switch away from discretionary spending and luxury items and toward basic necessities.

Translation: Toilet paper and rice are selling like gangbusters.

Reports of gains in retail spending were largely limited to grocery stores and pharmacies, although reports from Philadelphia, St. Louis, and Richmond indicated some pickup in sales of apparel, which the latter District attributed in part to severe winter weather.

Translation: Not only are we poor and unemployed, but it's so friggin' cold this winter we've had to buy more sweaters.

However, Dallas noted a modest increase [in business services], albeit less-than-expected, in demand for legal services due to increased bankruptcy proceedings.

Translation: You still have to pay someone to lose it all.

Providers of information technology (IT) services in the Boston District saw a drop in activity on average, although some firms have sustained strong revenue growth; activity among providers of IT services was reported as stable to up in Kansas City, and Minneapolis reported that some IT services firms have seen solid demand from companies that are intent on using the technology to reduce costs.

Translation: Fire ten people, hire another computer. It really works!

Manufacturing of biotechnology products and pharmaceuticals was one bright spot, with Boston reporting sales gains at a double-digit pace for biopharmaceutical firms, Richmond noting continued hiring of temporary staff among life sciences and pharmaceutical companies, and Chicago reporting continued strong demand for pharmaceuticals.

Translation: No longer able to afford weekly therapy visits, we've resorted to increased dosages of anti-depressants

Boston and Cleveland reported that loan demand and the availability of funds were more favorable for community banks than for institutions with a national scope.

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The Beige Book may well be renamed the Boring Book due to the uniformity of its monthly pronouncements, but a few things stands out in a report that saw moderate expansion in the economy across most of the US:

While in the "market", in which both bad and good news once again send stocks to new ATH, newsflow no longer matters, the most irrelvant of all economic reports is the Fed's beige book. It was thus not surprising to see stocks have absolutely zero reaction to a report which according to the Fed saw the US economy grow in every region of the US, bolstered by consumer spending, tourism, manufacturing and improving labor market. In fact: everything apparently is great.

WASHINGTON — A Federal Reserve survey shows severe weather held back economic growth in much of the nation from January through early February. Even so, conditions improved in most U.S. regions, thanks to slight gains in areas such as employment and commercial real estate.
Eight of the Fed’s 12 regions reported improved activity, according to the Beige Book survey released Wednesday. The improvement was depicted as “modest to moderate.”

Fed's Beige Book: Reports from the twelve Federal Reserve Districts indicated that economic activity generally continued to expand since the last report, though a few Districts indicated some deceleration. Some slowing in the pace of growth was noted in the New York, Philadelphia, Atlanta, and Chicago Districts. In contrast, Dallas characterized that region's economy as accelerating. Other Districts indicated that growth continued at a steady pace....

Imagine you’re browsing at Bloomingdale’s when a security guard taps you on the shoulder and accuses you of shoplifting. He takes you to a private room, sits you down, and runs your name through a database to see if you have any outstanding warrants. Then he tells you that you have two options. The first involves him calling the police, who might arrest you and take you to jail.

The 2013 holiday shopping season may end up being remembered for its ugly sweaters and, for many retailers, even uglier discounts.
With growing online competition, weak consumer confidence and no fashion must-haves, most U.S. retailers will have to offer both big discounts and stellar service to get consumers to spend freely, according to analysts who joined Reuters reporters on visits to stores in New York, New Jersey, California and Illinois ahead of the holiday season.

By Hale Stewart: Last week, the Fed released the Beige Book. This is one of my favorite economic releases, as it gives us near real-time data on the condition of the U.S. economy. Let's look at some of the data points.